DANCING NEBULA

When the gods dance...

Friday, February 17, 2012

Apple in China: End of the iPad?

Apple in China

FEW brands are as loved in China as Apple, and few business leaders worshipped as much as the late Steve Jobs, Apple’s longtime boss. In time, the booming Chinese market is likely to become the company’s biggest and possibly its most profitable. And yet Apple, whose shares touched $500 apiece this week, appears to be doing everything wrong in the country.

Three things have called into question its strategy. Last month, the firm had to delay the launch of the latest iPhone after chaos broke out among the throngs who had queued overnight for the gizmo. The firm, it seems, had not prepared adequate security and logistics. Then fresh allegations of poor working conditions surfaced at Foxconn, the Taiwanese contract manufacturer that makes Apple’s devices. This caught Tim Cook, the firm’s new boss, on the back foot. But it should not have; he was, after all, its penny-pinching head of operations for many years before taking on the top job.

Now comes the astonishing news that exports of iPads may, just possibly, be halted from China. Proview Technology, a Chinese firm based in Shenzhen, has for some time claimed that it holds the mainland trademark for “iPad”. Apple, through intermediaries, had paid Proview’s sister company, based in Taiwan, for what it thought were global rights to the name. But a court in Shenzhen has already ruled against Apple on the matter, and another court in Shanghai is due to hear Proview’s challenge on February 22nd. Apple hotly contests the claims made by Proview, and is appealing the ruling and actively contesting other court cases on the matter. Much hangs in the balance.

This week, it was reported that Proview had persuaded several Chinese cities to pull iPads off the shelves at retail stores. Xianghui Xie of Grandall, one of Proview’s lawyers, says it has asked over 40 cities to do so. He also confirms that the firm has asked China’s customs authorities to halt exports of the iPad. Initial reports suggested that this was unlikely to happen, but if it does Apple would be dealt a powerful financial blow.

Is this merely shameless extortion by a trademark “troll”? Mr Xie does not deny that his client is after money; a billion dollars, he says dryly, would probably be enough. But he vows his client is no mere troll. He insists it did develop an actual product in 2000 called the Internet Personal Assistance Device (though he does not produce one for inspection) and that it has real manufacturing facilities for it (though when outsiders visited the firm’s purported address in Shenzen this week they found a desolate warehouse). Despite claims to the contrary from Apple, he insists that the evidence and the law is on his client’s side. The Chinese blogosphere is abuzz with punters offering up possible alternative names (MacPad, anyone?).

On balance, it seems likely that Apple will prevail, if only by coughing up enough money to send Proview packing—something it should probably have done as soon as it realised its due diligence on the mainland had fallen short. But there is an irony here worth noting. Foreign technology firms often paint Chinese companies as copycats and cheats, and demand that China does more to respect intellectual property. It would be rum indeed if Apple were to be humiliated, exports of iPads interrupted and the name of its famous tablets changed for the local market simply because intellectual property rights and the rule of law are, in fact, upheld.